Vol. 21, No. 4, 2023 James X. Xiong, Thomas M. Idzorek and Roger G. Ibbotson U.S. active equity mutual funds have experienced net outflows since around 2006. The AUM-weighted performance remains similar over time, but equal-weighted performance (which emphasizes small AUM active funds) has deteriorated. Inflows/outflows contribute to the over/underperformance of individual active funds. We… Read more
the JOIM
Reimagining Index Funds
Vol. 21, No. 4, 2023 Rob Arnott, Chris Brightman, Xi Liu and Que Nguyen “Gold-standard” cap-weighted indices have a buy-high and sell-lowdynamic that causes a structural long-term performance drag. Of course,relative to itself, no index can underperform, which is the reason it goes unnoticed. If we use a company’s fundamentals to choose stocks—and then cap-weights… Read more
Grow The Pool: Diverse Directors Associated with Stronger Performance, but not if they are Too Busy
Vol. 21, No. 4, 2023 Mouhamadou M. Ba, Gerald T. Garvey, Brett Z. Miller and Katharina J. Schwaiger Minority representation on US boards has grown more than 50% in the last eight years, but this reflects an increase in the number of seats for existing minority directors as much as a diversification of the director… Read more
Practitioner’s Digest
Practitioner’s Digest Vol. 21, No. 4, 2023 View PDF… Read more
Case Study: Investment Management Lessons Learned From the Management and Mismanagement of Impending Bank Runs
Vol. 21, No. 3, 2023 Seoyoung Kim “Case Studies” presents a case pertinent to contemporary issues and events in investment management. Insightful and provocative questions are posed at the end of each case to challenge the reader. Each case is an invitation to the critical thinking and pragmatic problem solving that are so fundamental to… Read more
Book Review: Trillions
Vol. 21, No. 3, 2023 By Robin Wigglesworth (Reviewed by Javier Estrada) View PDF… Read more
The Determinants of Inflation
Vol. 21, No. 3, 2023 William Kinlaw, Mark Kritzman, Michael Metcalfe and David Turkington The authors apply a Hidden Markov Model to identify regimes of shifting inflation and then employ an attribution technique based on the Mahalanobis distance to identify the economic variables that dynamically determine the trajectory of inflation. Their analysis enables policymakers to… Read more
Asset Allocation with Non-Pecuniary ESG Preferences: Efficiently Blending Value with Values
Vol. 21, No. 3, 2023 Douglas M. Grim, Giulio Renzi-Ricci and Anna Madamba The explosion of interest in ESG investing has yielded several quantitative frameworks that seek to incorporate non-pecuniary ESG preferences into conventional multi-asset portfolio optimization models. In this article, the authors specify an accessible approach that allows investors to simultaneously optimize for both… Read more
Efficient Goal Probabilities: A New Frontier
Vol. 21, No. 3, 2023 Sanjiv Das, Daniel Ostrov, Anand Radhakrishnan and Deep Srivastav In goals-based wealth management (GBWM), an investor looks to maximize the probabilities of attaining each of n goals over time. Because the goals are in competition for potentially limited financial resources, their relative importance must be specified, which we do by… Read more
Are 60/40 Portfolio Returns Predictable?
Vol. 21, No. 3, 2023 Jamil Baz, Steve Sapra and German Ramirez Long-horizon asset class returns are reasonably predictable using simple models of expected return. However, equity returns over the last decade far exceeded model-based predictions. We posit a framework for the drivers of potential mean-reversion in equity returns. We believe increases in real bond… Read more